SEC Charges Hemp Company and Co-Founders With Fraud

The Securities and Exchange Commission today charged CanaFarma Hemp Products Corp. and its co-founders with fraudulently raising approximately $15 million from investors, and misappropriating a significant portion of the investor funds for personal use and other unrelated purposes.

The SEC’s complaint alleges that in 2019 and 2020, CanaFarma, a Canadian startup hemp company with offices in Vancouver and New York City, and its co-founders Vitaly Fargesen and Igor Palatnik raised millions of dollars from investors.  According to the complaint, while raising these funds, the defendants made misrepresentations to investors, including claims that CanaFarma was a fully integrated company that was processing hemp from its own farm when in fact it had not processed any of this hemp and its products used hemp supplied by third parties.  The complaint also alleges that financial information provided to investors misstated historical revenue numbers and included baseless projections about future revenues.  In addition, according to the complaint, Fargesen and Palatnik misappropriated at least $4 million and used the funds for their personal use and purposes unrelated to CanaFarma. 

“As alleged in our complaint, the defendants pitched investors with falsehoods about a fully integrated hemp company with rosy financial projections” said Richard R. Best, Director of the SEC’s New York Regional Office.  “We will relentlessly pursue those who deceive investors and misappropriate and misuse their funds.”

The SEC’s complaint, which was filed in U.S. District Court for the Southern District of New York, charges CanaFarma, Fargesen, and Palatnik with violating antifraud provisions of the federal securities laws.  The SEC seeks permanent injunctions, disgorgement and prejudgment interest, and civil penalties against the defendants, and also seeks officer-and-director and penny stock bars against them. 

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges against Fargesen and Palatnik. 

The SEC’s investigation was conducted by John Lehmann, Lee A. Greenwood, and Thomas P. Smith Jr., and was supervised by Sanjay Wadhwa.  The litigation will be led by Mr. Lehmann and Mr. Greenwood.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation.